The southwestern Connecticut office market followed up a strong first quarter with a mixed bag of results during the second quarter, with the vacancy rate of the southern submarket of Stamford and Greenwich outpacing the rest of the region.

The overall vacancy rate dropped to 16.3 percent during the quarter, 0.2 percentage-points lower than the rate recorded in the prior year and quarter, according to RHYS Commercial, a Stamford commercial real estate firm.

Across the submarkets, southern Fairfield County had the highest vacancy rate across the county at 19.7 percent, slightly higher than the previous quarter but unchanged on a yearly basis.

Northern Fairfield County saw another strong quarter, with the vacancy level dropping by 0.6 percentage-points over the quarter and 1.9 percentage points over the year to finish the quarter with an vacancy rate of 16.4 percent.

The central submarket's vacancy rate increased quarter to quarter, but dropped year over year to 14 percent.

Long-term optimism

The eastern submarket saw the strongest improvement in a quarterly basis, dropping by 1.2 percentage points to finish at 12 percent.

The improved levels in some areas gave Eric Griffin, director of research and financial analysis at RHYS, reason for long-term optimism.

"Down the road, I think things are improving, and I think availability rates will be going down the rest of the year," Griffin said. "There are more potential tenants looking for space."

The availability rate typically represents space that will be available in a market within the next 12 months.

In the southern submarket of Stamford and Greenwich, available space was virtually unchanged quarter to quarter, and there was 4.2 percent less space available after last year's second quarter.

One of the biggest beneficiaries of companies moving within the region was 3001 Summer St., in Stamford, owned by The Ashforth Co. In 2012, the 290,000-square-foot building underwent extensive renovations, and in the first quarter it started to pay dividends for the company as it signed Pitney Bowes and O'Connor Davies as tenants.

In April, Genworth renewed its lease for the building, and in May, it added Willis of Connecticut, global insurance risk adviser, as a tenant, bringing the occupancy level to 72 percent.

Willis of Connecticut moved from the Merritt 7 complex in Norwalk.

`Glacial improvement'

While Ashforth has been successful in attracting tenants, the overall office rental market has been slow, said Jim Fagan, senior managing director of the Stamford office of Cushman & Wakefield.

"I think we're seeing glacial improvement. Leasing is getting better, but there's still space coming back on the marketplace," he said.

The Greenwich office of Newmark Grubb Knight Frank reported the Stamford market saw some positive activity in the quarter with Vineyard Vines leasing more than 90,000 square feet at Shippan Landing and Stamford Hospital leasing 46,292 square feet at 292 Long Ridge Road.

But on the supply side, Purdue Pharma added 91,601 square feet at 201 Tresser Boulevard after taking the space back from UBS.

"Almost every single sector -- medical and retail -- is hot, except office," Fagan said. "With office, there's demand but a lot of supply. Office vacancy rates are still stubbornly high, which remains good for tenants."

The cost of debt for building owners remains relatively low, allowing them to hold onto their property for the time being, Fagan said.

9 West Broad renovations

Darien-based Forstone Properties showed its confidence in the Stamford office market in 2013 when it purchased 9 West Broad St., for $14.5 million.

It is completing extensive renovations at the 200,000-square-foot building, which is 15 percent occupied, according to RHYS, which is representing the property.

The project should go a long way in filling the building, according to Forstone Principal Brandon Hall.

"Tenant activity has been strong, and we feel these improvements will increase market interest and leasing velocity during the second half this year that will continue into 2015," he said.

"We believe 9 West Broad St. provides great rental options for the tenant who wants Class A space in downtown Stamford but doesn't want to pay top of the market rent, as well as the tenant who is looking for affordable options to upgrade their office space."

Forstone has said rents are in the high $20 range.

Saying the building provides dramatic views of the reconstructed Mill River Park, Hall said Stamford offers one of the state's most dynamic commercial office markets.